Getting divorced involves dividing assets, and retirement accounts are often among the most valuable possessions couples need to split.
Alberta family law treats pensions and retirement savings accumulated during marriage as shared family property that must be divided fairly between spouses.
Understanding how to properly handle the division of retirement assets can help protect your financial future and avoid costly mistakes during divorce proceedings.
Types of Retirement Assets Subject to Division
- Registered Retirement Savings Plans (RRSPs)
- Defined Benefit Pension Plans
- Defined Contribution Pension Plans
- Canada Pension Plan (CPP) credits
- Tax-Free Savings Accounts (TFSAs)
- Employee stock options and profit-sharing plans
How Retirement Assets Are Valued
The value of retirement accounts is typically determined as of the date of separation.
For defined benefit pensions, an actuary may need to calculate the present value of future benefits.
Growth or losses that occur after separation but before division may need to be accounted for in the final settlement.
Methods of Division
- Direct transfer: Assets moved between registered accounts tax-free
- Buyout: One spouse keeps the pension in exchange for other assets
- Deferred division: Benefits split when they become payable
Required Legal Documents
A Pension Division Order or agreement is needed to divide most workplace pensions.
RRSP transfers require a T2220 form filed with the Canada Revenue Agency.
CPP credit splitting requires specific forms submitted to Service Canada.
Tax Implications
- Direct transfers between registered accounts are typically tax-free
- Taking cash withdrawals triggers immediate tax consequences
- Future tax liabilities should be considered when valuing accounts
Common Mistakes to Avoid
- Failing to obtain proper valuations of complex pensions
- Not considering early retirement penalties or options
- Overlooking survivor benefit designations
- Missing deadlines for pension division applications
Getting Professional Help
Consulting with a family lawyer experienced in pension division is essential for protecting your interests.
Consider working with a financial advisor to understand the long-term implications of different division options.
The Law Society of Alberta Referral Service can help you find qualified legal representation: 1-800-661-1095.
Moving Forward with Your Financial Future
Review and update beneficiary designations on remaining retirement accounts after divorce.
Develop a new retirement savings strategy based on your post-divorce financial situation.
Consider consulting with a financial planner to create a revised retirement plan that accounts for your changed circumstances.
Timeline and Priority Considerations
Start planning for retirement asset division early in the divorce process to avoid rushed decisions.
Gather documentation for all retirement accounts, including recent statements and plan documents.
Consider which assets are most important for your long-term financial security.
Special Circumstances
Military Pensions
Military pensions have specific rules and requirements for division during divorce.
International Pensions
Cross-border pension division may require additional legal expertise and documentation.
Self-Employed Individuals
Business owners may need special consideration for retirement assets tied to their company.
Alternative Dispute Resolution
- Mediation can help resolve pension division disputes more efficiently
- Collaborative divorce processes may provide better outcomes for complex retirement assets
- Arbitration offers a private alternative to court proceedings
Post-Division Financial Planning
- Reassess retirement goals based on divided assets
- Adjust investment strategies for new account balances
- Consider catch-up contributions where eligible
- Review insurance needs and coverage
Securing Your Retirement Future
Document all agreements and keep copies of pension division orders in a safe place.
Monitor the implementation of retirement asset transfers to ensure proper execution.
Create a new retirement budget that reflects your changed financial circumstances.
Stay informed about changes in pension laws that might affect your rights and benefits.
FAQs
- How are pensions divided in an Alberta divorce?
In Alberta, pensions earned during marriage are considered matrimonial property and are typically split 50/50 between spouses through a Pension Division Order or agreement. - What types of retirement accounts are subject to division in an Alberta divorce?
CPP credits, RRSPs, defined benefit pensions, defined contribution pensions, and private pension plans earned during the marriage are subject to division. - How is the Canada Pension Plan (CPP) divided during divorce?
CPP credits accumulated during the marriage can be equally split between spouses through a process called “credit splitting” or “Division of Unadjusted Pensionable Earnings (DUPE).” - Do I need a special court order to divide a pension in Alberta?
Yes, you need a Matrimonial Property Order (MPO) or similar court order specifically addressing pension division to split most pension benefits. - What is the valuation date for pensions in an Alberta divorce?
Typically, pensions are valued as of the date of separation, but the actual division may occur at a later date as specified in the divorce agreement or court order. - Can my spouse claim a portion of the pension I earned before marriage?
Generally, only the portion of the pension earned during the marriage is subject to division, unless otherwise agreed upon by both parties. - How are RRSPs divided in an Alberta divorce?
RRSPs can be divided tax-free between spouses through a T2220 form (Transfer from an RRSP or RRIF on Breakdown of Marriage or Common-law Partnership) as part of the divorce settlement. - What happens if my employer’s pension plan administrator refuses to divide the pension?
If a pension cannot be divided directly, the court may order an equalization payment or other compensation to offset the value of the pension benefits. - How long do I have to file for pension division after divorce in Alberta?
There is no specific time limit for dividing pensions after divorce, but it’s advisable to address pension division during the divorce proceedings to avoid complications. - Can I opt out of pension division in my divorce agreement?
Yes, spouses can agree to waive their rights to pension division through a formal agreement, but it must be done with independent legal advice and proper documentation.
